OBJECTIVE To evaluate the cost-effectiveness of a genetic testing policy for HNF1A-, HNF4A-, and GCK-MODY in a hypothetical cohort of type 2 diabetic patients 25-40 years old with a MODY prevalence of 2%. RESEARCH DESIGN AND METHODS We used a simulation model of type 2 diabetes complications based on UK Prospective Diabetes Study data, modified to account for the natural history of disease by genetic subtype to compare a policy of genetic testing at diabetes diagnosis versus a policy of no testing. Under the screening policy, successful sulfonylurea treatment of HNF1A-MODY and HNF4A-MODY was modeled to produce a glycosylated hemoglobin reduction of -1.5% compared with usual care. GCK-MODY received no therapy. Main outcome measures were costs and quality-adjusted life years (QALYs) based on lifetime risk of complications and treatments, expressed as the incremental cost-effectiveness ratio (ICER) (USD/QALY). RESULTS The testing policy yielded an average gain of 0.012 QALYs and resulted in an ICER of 205,000 USD. Sensitivity analysis showed that if the MODY prevalence was 6%, the ICER would be ~50,000 USD. If MODY prevalence was >30%, the testing policy was cost saving. Reducing genetic testing costs to 700 USD also resulted in an ICER of ~50,000 USD. CONCLUSIONS Our simulated model suggests that a policy of testing for MODY in selected populations is cost-effective for the U.S. based on contemporary ICER thresholds. Higher prevalence of MODY in the tested population or decreased testing costs would enhance cost-effectiveness. Our results make a compelling argument for routine coverage of genetic testing in patients with high clinical suspicion of MODY.